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Hopefully transferring a solo 401k to Schwab isn't a huge deal. Still something i didn't want to figure out.
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Apr 18, 2024 01:35
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Boo, I have a simple with Vanguard. Hopefully the new admin will keep access to all their funds. Otherwise, I'll probably advocate moving to.. Fidelity?
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Apr 18, 2024 01:55
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drk posted:Boo, I have a simple with Vanguard. Hopefully the new admin will keep access to all their funds. Some googling tells me that it's either fidelity or Schwab, although apparently fidelity makes you fund solo 401ks either via mailing in a check or calling them (ie the phone) to transfer funds from another fidelity account.
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Apr 18, 2024 02:00
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Not sure about solo 401k, but the Simple says "Employers can contribute online". And they let you invest in ETFs, which my Vanguard acct does not.
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Apr 18, 2024 02:09
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drk posted:Not sure about solo 401k, but the Simple says "Employers can contribute online". Yeah I'm not quite sure. I see Reddit posts from within the past year with people complaining solo 401ks at fidelity have no online contribution option. Not sure if things changed and/or are different for SIMPLE plans. Edit: based on Reddit posts from fidelity (lol), apparently they've finally added this in the past few months. Residency Evil fucked around with this message at 02:25 on Apr 18, 2024 |
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Apr 18, 2024 02:14
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I have a weird problem caused by my company's 401k. My company allows the mega backdoor Roth in the 401k, but only inconveniently. You have mail all the forms to Vanguard and you can only do in service withdrawals 4 times per year. Vanguard customer service takes, on average, 4 weeks to handle this process, but sometimes they take more. The process is also buggy, Vanguard thought I quit the company last time and stopped adding my paycheck deductions to my account for a few weeks, which was a fun mess to sort out. Contributions in excess of the 401k limit are automatically converted to post tax contributions. So the minimal headache solution is to set how much money I want to contribute at the start of the year and start mailing in forms after I put in more than the normal 401k limit. I have to contribute at least 8% of my salary per paycheck to get the company match, so front loading everything is not an option. My job security is somewhere around government employee and tenured professor, I am fine assuming that I will be employed the whole year. The problem is that my start of year paychecks are larger than my end of year paychecks. This is because I get all of my tax deductible contributions done by summer, then I start paying taxes on mega backdoor Roth contributions. This year, I will go from ~$2900 a paycheck to ~$2500 and I hope to increase my contribution percentage next year, which will only increase the delta. Getting paid earlier is better than getting paid later, so I should be better off frontloading the tax advantaged part. Plus it minimizes paperwork and I can't really invest after tax contributions till they are converted, which would take a month and a half (on average) if I spread them evenly throughout the year. I am fine from a cash flow perspective, most months I spend under $3k. But I have some lumpy expenses which this makes it harder to plan for. What should I do with the start of year tax savings? Just stick them in an extended emergency fund? T-Bills? Breakable CDs? I can't use it to max out my IRA and HSA, my end of year bonus already covers that. pointlesspart fucked around with this message at 04:10 on Apr 18, 2024 |
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Apr 18, 2024 04:00
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Leperflesh posted:Took me a second to re-read, and that's not the regular Vanguard 401(k)s, nor ordinary trad and Roth IRAs. It's just the weirdo redheaded stepchildren: individual 401ks, SEPs, and SIMPLEs (neither of which ought to be called IRAs but they are, gently caress you whoever named them that). Edit: can rollover my SIMPLE to a regular IRA, maybe I'll do that
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Apr 18, 2024 04:23
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What is the procedure to rollover SIMPLE into IRA at vanguard?
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Apr 18, 2024 04:35
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Ascencus managed my last company’s 401k on behalf of Vanguard and they’ve been a total mess. I was forced to take an excess contribution distribution due to ERISA non-discrimination rule, and they withheld taxes for the wrong state. It’s been two months and I’m still trying to get a corrected 1099-R from them. (yes I filed an extension for the state in question … which I don’t reside in lmao.) Customer service has been kind, easy to reach in person, and useless for solving any actual issues.
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Apr 18, 2024 04:42
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Crunching the numbers on my retirement savings and comparing it to where I should be at my age right now. I’m realizing that despite having a good bit saved up already, only about 23% of that is in tax-advantaged accounts - 401ks, rollover IRA, Roth IRA. The rest is either in my HYSA, or in my long-term investment brokerage account (which isn’t supposed to be touched until I’m ready to retire). This is mostly due to either being a windfall from startup ISOs and some other RSUs (brokerage account), or from being over the Roth IRA contribution income limit (HYSA), so for one reason or another they couldn’t be moved into a tax-advantaged account. Most of the advice I see along the lines of “how much should I have saved up for retirement by age NN?” only talks about money in tax-advantaged accounts. Obviously the money in the HYSA is for short-term use and isn’t meant to grow like a 401k or IRA, but I’m not sure how to value my brokerage account. How should I treat it in comparison? With the assumption that I’m not touching it for like another three decades. Chances are this is a “go read your books again Pollyanna” thing but hey, gotta post post post. 
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Apr 18, 2024 19:04
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Couplea things: first the aside, which is that if you're over the roth IRA contribution limit you can do the backdoor roth, so look into that. Your non-tax-advantaged savings will throw off dividends and earnings and so on, and you'll have to pay taxes on those when you get them, i.e. every year. If you withdraw money to do that, that's a drag on your performance; if you spend money from your pocket to do that, you're effectively not depositing that money into savings, so it's the same. Otherwise they are similar when you compare balances, to a roth IRA account, in that you will not have to pay income tax on your money when you withdraw it when you retire...but different in that many of your withdrawals will involve a capital gain tax. So in principle what you need to do is discount your long-term non-advantaged savings by the additional tax you'll pay on them compared to other savings, both the drag mentioned above plus the capital gains taxes on sale (see below). There are retirement calculators that are advanced enough to sorta do this for you, but it's always going to be a guesstimate because not only are you trying to project what your tax rate will be in retirement, you're trying to project what the capital gain will be on the assets you sell. And while we typically use a projected earnings rate on our investments (like, say, 7% above inflation) that's for the whole portfolio: in retirement, to avoid capital gains in high-tax years you may be able to selectively sell the worst-performing assets. But on the other hand, you may prefer to selectively sell the best-performing asset in any given year, because you'll have an asset allocation and selling the outperformers while buying more underperformers is the only way to rebalance once you're no longer making contributions. So the tl;dr of that is that it's harder, and IMO the way to do it is just discount your projected returns above inflation by some amount, like say 1%, and discount your projected withdrawals by some reasonable amount, like say 10% or so, compared to savings in an IRA. Like say you project your roth ira to grow 8% above inflation annually for 20 years, you might project your identically-invested (asset balances) brokerage account to grow 7% above inflation instead. And then say you assume you'll be pulling X of the total balance of your IRA out annually in retirement and that's $Y, assume in order to get $Y from your identically invested brokerage account you'd have to withdraw 10% more than X. If X is 20k, assume you have to pull $22k from the brokerage account to get the same $20k of after-tax money. The above numbers are all kinda pulled out of my rear end, but I feel like they're not gonna be wildly off the mark. The long term capital gains tax on your investments is likely to be 15%, but that's on the gains, not the principal, so if your money tripled in value then you'd pay LTCG on the difference, not the total, so like 10% instead of 15% is how I got there. That's fudgy. E. a third factor is that you'll be able to decide in retirement how much over the RMDs to take from your tax-advantaged accounts, if that allows you to defer paying LTCGs on your brokerage balances. And, you can set your total asset allocation to put more tax-efficient investments into your brokerage, which should further reduce your ultimate tax exposure. But, doing this would likely mean a different rate of return on the brokerage balances, which in turn affects your projected growth rates... yuck IMO just shovel a bit extra in there and be conservative with your projections for tax reasons and then don't stress about it too much. There's a good chance by the time you retire congress will change the tax laws anyway. Leperflesh fucked around with this message at 20:25 on Apr 18, 2024 |
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Apr 18, 2024 20:13
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Leperflesh posted:
Discounting your real returns doesn't cover the problem. If you have a real return 5% above inflation, but inflation is 4%, that is substantially worse for a taxable investor than a real rate of 5%, but inflation is 2%. This is because the inflation adjustments to the initial investment are taxable, so they eat into principal. To use an example consider $10,000 invested at 0% real for one decade, one with 4% inflation and one with 2%. They have inflation adjusted cost bases of 10*(10.04**10)=$14,802, $720 LTCG owed, 4.8% of total 10*(10.04**10)=$12,189, $328 LTCG owed, 2.6% of total Assuming you have to pay 15% LTCG. The problem actually inverts if we have deflation, since the losses to your cost basis start making your returns tax free. But the odds of sustained deflation are substantially lower than inflation. Over a long enough time period of positive inflation, the ratio of your cost basis to the current value of your investment tends toward zero. So you can analyze the worst case scenario by assuming you will have to pay LTCG on all your taxable investments. It can't get worse than that, unless you have to pay taxes on inflation adjustments along the way.
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Apr 18, 2024 21:40
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If you were lump sum investing that would all make sense but I was assuming the investor is doing the thing most investors for retirement do, and adding cash periodically throughout their working careers. LTCG will be higher for the earlier investments and lower for the later ones, but the earlier purchases would tend to be for smaller dollar amounts (lower salary) and later ones higher dollar amounts (higher salary). And presumably you can be smart about which lots to sell and maybe even do a bit of tax loss harvesting. Still, what you're saying is a very good point, the basis cost for finding your capital gain is in nominal not inflation adjusted dollars. Leperflesh fucked around with this message at 23:54 on Apr 18, 2024 |
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Apr 18, 2024 23:52
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I'm not sure you can make the assumption that retirement savings will follow the normal, gradually rising path for the OP. Windfalls and RSUs are highly variable and subject to feast and famine periods. The way to properly do this is to specify exactly how much you will be investing in each time period (negatively for withdrawals), what the returns will be in each period, the inflation rate, and the tax rate. The cost basis issue means how you get to a certain investment amount matters, path dependence is a pain. But you can avoid all of these cost basis issues and use a simpler model if you promise to only touch your taxable investments in the following ways: 1. Never dip into principal. You pay for taxes on dividends out of dividends, so multiply them by the appropriate tax rate. You will need two rates of return to model it, one on the principal and one on the dividends. 2. Never sell any taxable investments. Even if you have a loss, how much loss will vary based on your cost basis. So just never sell. 3. You may donate taxable investments to charity, you get the full tax write off from those regardless of the cost basis. 4. Die. If you have less than $13.61 Million, you won't pay estate tax and your investments get a step up in cost basis. If you have more than $13.61 Million, you should probably be paying someone to worry about this for you. This will make it easier to model the problem, in exchange for making it harder to solve the problem. Or you can accept some uncertainty in retirement planning and sell your assets as needed. The error bars for financial planning are fairly wide anyway, I'd project out a best, worst, and average case scenario. Maybe work out an average taxable cost basis for year X, add in some inflation scenarios (0%, 1%, 2%, 4%, 8%, 16%), and discount dividends stock and bond funds by LTCG rates in the historic range of 15%-25% (net of tax deductions). A simple script would be able to handle it.
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Apr 19, 2024 02:52
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